The World Bank Group and The Y2K Bug Threat to Developing Countries

The efforts to tackle the Year 2000 problem undertaken so far in developing countries, are modest, given the enormity of the task and the global impact of a failure to act. It is now obvious that January 1, 2000, while not Doomsday, will unleash a chain of problems that will touch millions of people, with the damaging effects hitting the least-prepared, namely governments and businesses providing services to the world's poor. Efforts by the World Bank, the UN and others can support some Y2K-fixing, but their most important effect must be a wakeup call to national, regional and local governments, companies and other international organizations to get involved now. Developing countries must devise contingency plans for those vital systems that are not yet Y2K-prepared, as they dash, much too late, to develop an overall Y2K solution.

The World Bank and Y2K

The World Bank, in cooperation with a handful of donor countries such as the United Kingdom, the U.S., Sweden and Canada, and other multilateral development banks, UN agencies and international private sector organizations, has undertaken an effort to raise awareness of Y2K, and to provide technical assistance and funds to help developing countries address it.

The Bank's Y2K outreach initiative is open to all donors and championed by its infoDev program, an internationally funded program launched in 1995 to help developing countries mobilize information and communications technologies to promote their economic and social development.

The following actions merit special mention:

The infoDev Y2K initiative financed by US$30 million in donor trust funds has delivered Y2K seminars to 1,500 government ministers and information technology managers from 120 countries.
It has also approved 65 grants proposals and is considering 21 more grants for Y2K planning and repair work.

In an effort to coordinate international Y2K activities and information sharing so as to minimize the potential effects of the Y2K problem on the global economy and society, the International Year 2000 Cooperation Center was launched on February 5, 1999 with the direct financial support of the World Bank Group through a contribution from the US to the infoDev Y2K initiative. In addition, infoDev will fund a series of regional and global conferences focusing on continuity planning organized by the Center. Fellowships will be provided for the attendance of representatives from national Y2K programs of developing countries.

The World Bank Group President James D. Wolfensohn has written to a number of government leaders in Africa, Eastern Europe and Central Asia, and other regions, urging them to make contingency plans for dealing with potential Y2K related problems and informing them that the World Bank Group stands ready to help its client countries in their assessment and repairs efforts, either with funds from on-going operations, special technical assistance loans, or special grants (via infoDev):

The World Bank Group is advising governments to ensure that Y2K problems do not undermine activities connected with the Bank's loans to developing countries, ranging from support for power generation to pension reform. As of January 1999, about one third of the World Bank's portfolio of 1698 projects are considered to be at high risk of Y2K disruptions. These are mostly projects in health, power, finance and communications.

The Bank has approved loans of $29 million to Sri Lanka and $30 million to Argentina to support specific Y2K preparations. A third Y2K loan of $100 million to Malaysia is being negotiated and interest has been expressed in other countries such as Cameroon.

The International Finance Corporation -- the private sector arm of the World Bank Group -- has also been surveying its 970 investee companies to assess their Y2K readiness and offers outreach services to its clients.

Y2K preparedness in developing countries

A World Bank survey (conducted from October to December 1998) covering 139 developing countries found that only 39.5 percent of them had an appointed national Y2K coordinator and an action plan to make their systems Y2K-compliant. Last December, officials from 120 countries who gathered at the United Nations to discuss the problem, agreed that their governments should assign the "highest priority" to the Y2K problem. Since then 38 additional national coordinators were appointed -- in total 67% of surveyed countries.

Having a national plan is only the first step in getting systems ready for 2000. Implementing such plans is costly, both in funds and deployment of highly-skilled technicians. While wealthy countries and large companies have the money and the people needed to immunize embedded systems, computers and their operating software from the millennium bug, many developing countries cannot muster the resources to tackle a problem that most see as a vague and distant threat.

The Millennium problems of Sub Saharan Africa for example, are unlikely to have major effect on worldwide telecommunications, but may have a significant impact on indigenous Sub-Saharan telecomm operators and the local economies of the region. Conservative estimates of the telecomm direct compliance costs in the region are approximately US$200 million.

The Y2K preparedness in developing countries appears consistent with the level of GDP and is generally characterized by a slow and, in some cases, complacent response to Y2K . This can be attributed to the existence of other national priorities including resources scarcity, social instability, natural disasters, government turnover, just to name a few. Another explanation for the developing nations' complacent stand towards the Y2K problem is the over-reliance on industrialized countries for technology support and vendor assistance. As the millennium inches ever closer, however, the consequences of inaction and lack of preparedness grow more real. For example, many developing countries, such as those in Africa, have regional power-sharing arrangements where they rely on a neighbor's electrical supply which, in turn, uses computer micro-chips and software that may not be Y2K-compliant.

Middle Eastern countries depend on computer-managed water desalinization plants for freshwater supplies, and oil drilling rigs around the world use 'embedded' chip systems, some of them buried on the ocean floor. Food and fuel distribution networks, health care, education, and road, air and maritime links could be severely affected.

Risks posed to developed nations

The same interdependence threat applies to trading partners that rely on developing countries for the supply of raw materials, manufactured goods and off-shore labor. Beyond these threats, Y2K disruptions could potentially trigger social instability, a backlash against technology and donors or cause a strain on diplomatic relations.

It is already too late for most developing countries to carry out enough Y2K preparations to avoid all disruptions. Instead, they should urgently devise contingency plans, for example, identifying a society's critical sectors and systems e.g., water, power, food, health care, telecommunications, transport, finance and trading-checking the bugs in them, and preparing a backup plan should those systems, or their 'fixes', fail on January 1, 2000. But this Herculean task costs money and more than everything else political leadership, for developing countries to focus on an "obscure" technological glitch amid the multitude of day-to-day economic and social problems faced by them.

For the donor community, coordinated actions such as the ones envisaged under the International Year 2000 Cooperation Center, are a must. The pay-off in mitigating developmental impacts of the Y2K bug and in averting major negative externalities from disruptions abroad can be substantial. Through infoDev, the World Bank will continue to support the Center in helping countries better assess their status of readiness, develop contingency plans and deal with regional and global interfaces. Following up on Mr. Wolfensohn's letters to world leaders, the Bank will continue its dialogue with governments of its client countries to accelerate interventions to address this important problem.

James P. Bond is coordinator of Year 2000 operational initiatives at the World Bank and Director for Energy, Mining and Telecommunications. For more information on the World Bank's Y2K activities, visit www.worldbank.org/y2k

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Yet another "doomer" organization (non-profit, no less!) paints a grim picture, which will be ignored by 'optimists'.